A fully leased San Francisco office building is set to be sold for about $240 million in the priciest deal on a per-square-foot basis since the 2007 peak, according to a person familiar with the transaction.
The State Teachers Retirement System of Ohio agreed to buy Foundry Square I from AREA Property Partners in a deal scheduled for completion in mid-April, said the person, who asked not to be identified because the sale isn’t done. The 334,000-square-foot (31,000-square-meter) Class A building, occupied by money manager BlackRock Inc., whose lease expires in 2023, is located in San Francisco’s South of Market area.
Rents are climbing in San Francisco, where growing technology firms are leasing space, causing office vacancies to fall. The price for Foundry Square, one of three buildings in a complex at First and Howard streets south of the financial district, works out to about $719 a square foot. That’s the highest since Alexandria Real Estate Equities Inc. paid $650 a foot last year for a two-building complex in Mission Bay, data from broker Jones Lang LaSalle Inc. show.
“This just shows the heightened demand for tech-oriented buildings,” said Colin Yasukochi, a Jones Lang LaSalle research director.
Foundry Square IV
A second building in the complex, known as Foundry Square IV, is being marketed by Sacramento, California-based Palmer Capital Inc., David Smith, a partner at the real estate firm, said last month. The property has 233,000 square feet of space and is fully leased to Oracle Corp., which has sublet the building, according to Jones Lang.
San Francisco’s citywide office vacancy rate was 14.7 percent in fourth quarter, the ninth-lowest among 79 metropolitan areas surveyed by Reis Inc. Asking rents in South of Market gained 22 percent in the fourth quarter from a year earlier to $46 a square foot, the biggest increase since 2000, according to Jones Lang.
Telephone calls seeking comment from AREA Property Partners and Nick Treneff, a spokesman for the State Teachers Retirement System of Ohio, weren’t returned.
The agreement was disclosed in a Deutsche Bank note earlier today.